[SURVEY] Will Optimism Increase the Nation’s Housing Supply?

Homes.com recently released the Local Market Index and Rebound Reports indicating that the housing market is steadily recovering from the effects of the great recession. Additionally, the National Association of Realtors® reported that the U.S. housing market is ‘solidly recovering.’ As home price gains momentum, more homeowners are becoming increasingly comfortable with bringing their homes to the market. But will an increase in the nation’s housing supply cause these gains be short-lived?

According to an annual survey from Fannie Mae, American confidence in the ability to buy and sell a home ascended sharply due to recent strong home price gains. In fact, the share of respondents who say now is a good time to sell a home reached a record high of 40 percent, compared to 30 percent in April and 16 percent one year ago.

Doug Duncan, senior vice president and chief economist at Fannie Mae, stated that this was the largest increase in the survey’s three-year history and this jump may foreshadow a gradual return to more normal levelsof housing supply from their lows of recent months. Duncan continues by saying that “the increased housing supply could serve to temper increasing consumer home price expectations.”

This means that the recent boost in home values is a result of there not being sufficient inventory on the market to satisfy buyer needs, so when a home does sell it can be sold at a higher price. What is going unnoticed is that as more homes flood the market, their values will lessen and consumers will not receive the higher returns as expected.

Although flooding the market may decrease returns, the lessened ability of buyers to finance these homes may preserve the higher home price expectations. According to the report, 50 percent of Americans think that it would be difficult to get a mortgage and 46 percent believe that mortgage rates will go up. Duncan concluded by saying, “We will closely watch the potential impact of rising mortgage rates on consumer housing sentiment in the coming months.”

Here are some key highlights from Fannie Mae’s survey:

At 76 and 40 percent respectively, respondents reported that it’s a good time to buy and sell a house reached survey highs

The average 12-month home price change expectation jumped to 3.9 percent, the highest level since the survey’s inception.

The share of respondents who said they would buy if they were going to move increased slightly to 66 percent.

The share of people who say home prices will go up in the next 12 months hit a survey high of 55 percent, while those who say home prices will go down dropped to 7 percent, the lowest level since the survey’s inception.

Read the entire Fannie Mae survey to learn more. Do you think it’s really a good time for sellers to bring their home to the market? Will the expected increase in the supply of homes slump home prices or will the inability to receive mortgage loans counteract a flooding of the market? Check out the Homes.comLocal Market Index and Rebound reports’ to see what areas are seeing the biggest changes. Let us know on Facebook what you think will become of the nation’s and your local housing market in the coming months.